Boost for Telecom in mobile market

Telecom defied the expectations of analysts by yesterday, reporting a 64,000 net increase in mobile connections on its ultra fast XT network, during the three months ended September.

Analysts had previously thought third mobile company 2degrees might have slowed Telecom's mobile growth.

Telecom chief executive Paul Reynolds told media and analysts the company had been successful in a market that had seen a significant rise in competition and customer choice.

Telecom now had 242,000 customers on XT, at the end of its first full quarter of operation.

"We are delighted that the great customer experience offered by XT encourages customers to use their mobile services more, with an increase of 16% in average revenue per use on like-for-like customers."

The rest of the year would see the deployment of new mobile technology, which offered maximum mobile speed data of up to 21 megabits per second, he said.

That would make XT one of the fastest mobile networks in the world.

Telecom's earnings before interest, tax, depreciation and amortisation for the quarter was $447 million, down 4.1% on the $466 million reported in the previous corresponding period.

Net earnings were up 9.4% to $163 million, thanks to a tax gain of $5 million and a 25% reduction in interest costs to $36 million.

A Southern Cross dividend of $35 million was received in the quarter.

Revenue for the quarter fell 6.5% to $1.34 billion, but operating expenses fell faster to $909 million, a 7.7% fall.

Dr Reynolds said the impact of the economic downturn so far remained modest and, once again, all "undertakings milestones" had been met on time as New Zealand's largest IT transformation continued at a fast pace.

Telecom had assessed the impact of the slowing economy at up to $10 million during the quarter, consistent with all four quarters of the previous financial year.

Telecom chief financial officer Russ Houlden said the impact of the downturn on Telecom in the first quarter was modest but the potential existed for that impact to increase.

The fixed broadband market growth remained stable in the quarter at around 11%, with total connections on Telecom's network reaching 899,000 by September.

Telecom retail attracted 50% of the new customers and its share of the market had remained at 57%.

Commenting on the Government's fibre plans, Dr Reynolds said Telecom had an "open dialogue and relationship".

"Telecom remains engaged at multiple levels of government. The current structure makes it difficult for Telecom to participate effectively while balancing shareholders' interests."

Discussions had emphasised Telecom's support for the Government's "vision" and Telecom's belief that, given the right structure, it could be a partner with the Government to deliver ultra fast broadband faster, and more cost-effectively, to more New Zealanders than anyone else.

That would avoid network duplication, he said.

"We remain very flexible and open-minded."

At a glance
Revenue: $1.34 billion; down 6.5%
Operating profit: $447 million; down 4.1%
Dividend: 6c per share unchanged
Full-year guidance remains unchanged